For more than 10,000 Olympic athletes, making it to Paris this summer is a dream come true. Thousands of potential tourists feel otherwise.
Delta Air Lines says travelers are avoiding the city this summer and booking to destinations elsewhere, amounting to a $100 million hit for the airline during an otherwise bustling summer for European travel, CEO Ed Bastian said.
Delta’s third-quarter profit and revenue forecast fell short of Wall Street expectations after airlines flooded the market with added flights. The airline reiterated its full-year outlook on Thursday.
“Unless you’re going to the Olympics, people aren’t going to Paris … very few are,” Bastian told CNBC. “Business travel, you know, other type of tourism is potentially going elsewhere.”
Delta has the most service of any U.S. airline to Paris and holds a joint venture with Air France. Together, the two carriers have approximately 70% market share in nonstop service between the U.S. and France, according to consulting firm ICF.
On July 1, Air France-KLM, the parent of Air France, forecast a revenue hit of as much as 180 million euros ($195.5 million) in June through August because of the Olympic Games.
“International markets show a significant avoidance of Paris,” the company said. “Travel between the city and other destinations is also below the usual June-August average as residents in France seem to be postponing their holidays until after the Olympic Games or considering alternative travel plans.”
Bastian said Paris demand after the Olympics, which run July 26 through August 11, will likely be strong. “During the period itself there’s a little bit of a hesitation,” he said. Air France-KLM had a similar projection.
One clear deterrent for mid-summer travel to Paris: Prices for hotel rooms are set to skyrocket.
Hotel-data firm STR said revenue per available room for upscale hotels in the City of Light will soar as much as 45% in July and August from the year-earlier period. Meanwhile, it forecasts a 3% to 5% increase in the metric in London and 2% to 4% increase in Rome for the same months.
Many travelers were already shifting their European vacations beyond the traditional summer travel season, Delta’s president, Glen Hauenstein, said on an earnings call on Thursday. That gives airlines a chance to earn more revenue outside of traditional peak seasons.
“We see the season extending as a whole group of people, whether or not it’s retirees, whether or not it’s people with double incomes and without children, who don’t have the school concerns,” he said. “It’s actually a better time to go to Europe in September and October than it is potentially in July and August when the weather is so hot and everything is so packed.”
He also said Delta is seeing a boom in travel to Japan, thanks in large part to a favorable exchange rate for U.S. tourists.
“When the yen was 83 [per U.S. dollar], it was very difficult to be able to afford to go see Japan and all the great things that Japan has to offer. With the yen at 160, it’s a very different world for U.S. travelers and they seem to be taking great advantage of that,” Hauenstein said.
Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through 2032.
Read the full article here
